The Behavioral Elasticity of Tax Revenue

Abstract This article presents a measure of the efficiency consequences of changes to tax policies that inform a wide range of tax law debates. Building upon recent extensions to the “elasticity of taxable income” concept, we clarify the relationship among revenue effects, administrative costs, and...

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Bibliographic Details
Published inThe journal of legal analysis Vol. 13; no. 1; pp. 381 - 438
Main Authors Hemel, Daniel J, Weisbach, David A
Format Journal Article
LanguageEnglish
Published Oxford University Press 2021
Subjects
Analysis
Basis (Taxation)
Income distribution
Income tax
Industrial efficiency
Laws, regulations and rules
Revenue
Tax administration and procedure
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Summary:Abstract This article presents a measure of the efficiency consequences of changes to tax policies that inform a wide range of tax law debates. Building upon recent extensions to the “elasticity of taxable income” concept, we clarify the relationship among revenue effects, administrative costs, and compliance costs. The resulting measure—the behavioral elasticity of tax revenue (BETR)—captures the change in total resources resulting from marginal changes in tax rates, the tax base, or tax enforcement. We illustrate the BETR’s utility through a series of case studies. We also show how the BETR can help policy makers select more efficient redistributive mechanisms.
ISSN:2161-7201
1946-5319
DOI:10.1093/jla/laab003